British house prices rose by an average 2.2pc to £234,000 in the year to
January, as London’s booming property market grew still more split from the
rest of the country.

The headline UK price growth represented a slowing of the 3.3pc rate seen in the year to December, due to a 0.7pc monthly price fall in January alone, according to the Office for National Statistics (ONS).

Monthly movements can be volatile and the ONS said house price growth remains “relatively stable” across most of the UK. House prices are now at similar levels to mid-2008 prices, although they remain below their pre-crisis peak.

The growth is far from uniform, however, as it is being driven by the London property market, to which foreign investors have turned as a “safe haven” for their money.

In contrast, Northern Ireland was the worst performing region on the latest data, with house prices dropping by 5.4pc to £130,000, continuing their downwards trajectory of the last half a decade.

Excluding London and the South East, UK house prices increased by just 1.2pc in the 12 months, the ONS said. When inflation - which has long been running over the official 2pc target - is considered, prices actually fell in “real” terms outside London.

The capital will continue to be the driver of headline house price rises, according to Daniel Solomon, an economist at the Centre for Economics and Business Research, as the pound’s recent fall will attract more foreign buyers to the capital.

“Sterling depreciation has made London property more affordable for foreign buyers,” he said. “If the pound fails to recover lost ground, the weak currency has the potential to increase London prices throughout 2013.”

There are also signs that the Government’s emergency Funding for Lending Scheme to encourage the flow of credit is cutting mortgage rates, although the availability of the loans is still much reduced compared to before the financial crisis.